It has been a long time between posts, and this current post covers an area that I've been musing over for an equally long time (and then some!). At the IUCNWorld Parks Congress in November 2014, I had been struck by how mainstream the idea of Natural Capital Accounting (NCA) already was (NCA can also be referred to as Environmental Accounting or Full Cost Accounting). I had been aware of the 1997 paper by Costanza et al. on the value of the world's ecosystem services and natural capital, and the work by The Economics of Ecosystems & Biodiversity (TEEB) to mainstream the economic visibility of nature, but I had not realised how broadly NCA concepts had been adopted by individuals and organisations in the conservation and development fields. In particular, UNEP and the World Bank were championing NCA as an essential tool for future sustainability and for establishing 'green economies'. An excellent and succinct graph and write-up of pivotal events and publications fostering NCAcan be found at Globe International's page on the international efforts towards natural capital accounting.

My following blog post is a slightly modified copy of an opinion essay that I submitted as part of my Masters of Environmental Management program. There is a lot more to this topic than can be covered in a single blog post (or opinion essay), but it's a start. Some additional resources/links are provided at the end of the post.

Natural Capital Accounting: Is pricing nature the best way to protect it?

The past three decades have seen the steady development of accounting systems designed to capture the true economic worth of ecosystems and the beneficial services that flow from them. The natural world provides countless ‘free’ services, referred to as ecosystem services, including the generation of clean air, stabilisation of water catchments, providing timber and fibres, and absorbing wastes (Costanza et al., 1997; MA, 2005). Natural Capital Accounting (NCA) seeks to represent these services in financially measurable terms to reduce the overexploitation and degradation of natural systems (UNSD, 2014). Despite mainstream progress of NCA, concerns about the efficacy of this conservation approach abound, and sceptics, including myself, remain unconvinced that this solution will be a panacea to humanity’s ongoing exploitation of the natural world.

For a quick primer on what Natural Capital Accounting is, and what it seeks to achieve, see the following short video by the World Bank:

Ackerman and Heinzerling (2002) provide a detailed analysis of the limitations of economic rationalisations of the natural world. A critique of the economic process of NCA is essential for understanding the limitations of allocating dollar values to nature through tools such as contingent valuations, revealed preferences, travel cost analyses, and hedonic pricing, as well as for understanding the limitations of a Cost-Benefit Analysis (CBA) as a decision-making tool (Anderson et al., 2014). Despite the necessity of an economic critique, I believe that the economic arguments for and against NCA can divert attention away from other salient critiques of NCA. It is these other issues that I will delve into further.

An initial critique of ecosystem service valuations questions the legitimacy of placing dollar values on complex systems that possess non-use and intrinsic values (Kenner, 2014). This critique of NCA pits opposing standpoints against one another, divided along utilitarian versus ethical perspectives, and anthropocentric versus ecocentric values. The former perspective embraces trade-offs between theoretically commensurate environmental costs and benefits to human amenity, while the latter perspective argues that financial comparisons--between ecosystems and development proposals--are fraught with irreconcilable subjectivity, and that human amenity is not the only relevant criteria to satisfy.

A second common refrain against NCA is an opposition to the commodification of nature (Figgis et al., 2015), or turning nature into dollars. Proponents of NCA argue that the Dollar (or Euro, Yen, etc.) is used as both a measure of value and a common unit for comparison between natural and financial systems (UNSD, 2014). This is not about putting a price tag on nature, but providing a measure by which trade-offs and decision-making can be enhanced through knowledge of the costs and benefits of retaining, removing, improving, or permitting the degradation of an ecosystem (Weber, 2014). At the 2014 IUCN World Parks Congress in Sydney, I listened to Achim Steiner, then executive director of UNEP, argue the case for ecosystem valuations, stating that a failure to place a price on nature effectively leaves nature valued at zero dollars (A Steiner 2014, pers. comm., Nov. 14). It is a compelling point that shows how nature can appear invisible to national and business accounting measures, but it is also a clear representation of the way NCA frames humankind’s relationship with the environment by arguing that environmental degradation is a product of undervalued and overlooked “natural capital” (Weber, 2014).

Achim Steiner, 2014 Executive Director of UNEP, speaks at the IUCN World Parks Congress in Sydney. Image: James Lee

Framing nature in terms of economic systems alters the values with which we assess the environment. NCA brings “scarcity, efficiency, and profit” (Gomez-Baggethun and Ruiz-Perez, 2011) to the fore as essential criteria for conservation decision-making, pushing aside other possible values such as the existence value of nature. NCA proponents express an aversion to intrinsic or existence values, noting that they are incompatible with financial analysis. The mere mention of existence values, or non-financial metrics, elicits bold protestations that such thinking is “dangerous” (Helm, 2015) and that it is “unacceptable” to leave nature with “an effective ‘zero’ price” (TEEB, 2010, p. 12). Arguably, the incompatibility of existence values with ecosystem valuations speaks more about the inadequacy of economic valuations than it does about people’s perceptions of nature. Furthermore, the justification--that humankind will continue to exploit unpriced services--uncritically assumes that pricing ecosystems is the solution to the exploitation, without considering that the development and fostering of other, more ecocentric, values and ethics presents an alternative pathway.

Another concern at the forefront of ecological economics and sustainable development is the question of distributional equity, or the just disbursal of costs and benefits from development efforts (Illge and Schwarze, 2009). The greatest beneficiaries of direct ecosystem services are poorer communities, especially in developing countries, as they disproportionately rely on their local environments for food, shelter, clean water, and for resilience against environmental shocks such as storms, floods and droughts (De Coninck, 2009). Against this imbalance of direct environmental dependency, there is great concern that NCA will not guard against unjust distribution of costs and benefits. To borrow an example by Monbiot (2014b), a shrimp farm may generate fewer benefits than the intact mangrove it is proposed to replace, but if the ecosystem service benefits of the intact mangrove are enjoyed by the local community, while the financial benefits of a shrimp farm go to a private farmer, there is little reason to assume that the mangrove will remain intact, despite its greater natural capital value.

Implicit in this concern about NCA are questions of power and political influence, which are inherent in decision-making processes. Environmental decision-making is not conducted in a scientific or an economic vacuum (Kiker et al., 2005), but in a dynamic, socio-politically charged environment complete with development lobbyists, special interest groups, local communities, multi-national corporations, and, unfortunately, corruption. Power is also a concern at the valuation stage of NCA, with vocal opposition to the methodologies of ecosystem accounting coming from civil society organisations (CSOs) and Indigenous groups (Kenner, 2014). Kenner (2014) highlights the disparity between actors in the Global North, including NGOs, the World Bank and other financial institutions, leading the process of valuing natural capital in the Global South, where environmental values are not uniform--and potentially poorly understood or consulted--leading to a paternalistic imposition of Global North values into the Global South. In these circumstances, NCA could lead to the perverse outcome of undermining local communities’ rights to manage and protect their own environmental commons, and usurping local governance institutions (Global Forest Coalition, 2012, cited in Kenner, 2014).

A critical concern regarding NCA is that the pricing of nature overlooks the underlying behavioural patterns that continue to drive environmental degradation. While pricing nature addresses the market’s failure to account for the free services it utilises, the process of ecosystem valuation does nothing to address the ongoing culture of endless consumption, demand for single-use conveniences, ongoing economic growth, and ongoing population growth. Biodiversity offsetting, as a particular expression of NCA functionality, is a clear example of avoiding the behavioural drivers of environmental degradation (Arsel and Büscher, 2012). Offsets effectively allow the continued decimation of ecosystems so long as an analogous ecosystem is preserved, restored or created. There is, to me, a lazy hubris inherent in biodiversity offsets, as human knowledge of ecosystem dynamics and function is far from perfect, so offset ecosystems may not fulfil the same functions, or hold the same socio-cultural (or spiritual) relevance (Monbiot, 2014a), as the ecosystem sacrificed to development. It is laziness to not examine the deeper values and connections people have with natural areas, and it is hubris to think that our offsets will be adequate compensation for ecosystem losses when the exact impact of losing those ecosystems is unknown.

Alternative strategies for conservation and environmental management that do not require natural capital valuations do exist, but they require deeper engagement with the socio-political, cultural, legal and economic values of local communities. Baveye et al. (2016) explore the use of Multi-Criteria Decision Analysis (MCDA) as an effective, yet complex, tool for environmental decision-making that does not undertake financial valuation of ecosystem services; rather, it relies on decision-makers to understand the benefits of healthy ecosystems to inform their decision-making processes. MCDA also recognises that environmental decision-making is not isolated from ethical and moral considerations, which cannot be reduced to simple, uniform economic measures (Kiker et al., 2005). Another approach to environmental management and stewardship that does not require ecosystem valuations involves providing legal standing and protection to ecosystems or landscapes. This emerging and developing approach to conservation has its own challenges to address (Burdon, 2010), but unlike natural capital accounting, it wholly embraces the intrinsic value of nature.

Despite positive aspects of Natural Capital Accounting, including the aim to make the environment more (economically) visible to human endeavours, there remain several objections to the process of valuing ecosystems and their services. Above all, the process of accurately translating complex ecological systems into meaningful economic values remains contested and it is arguably incapable of accounting for the ethical, non-use, non-monetary, or intrinsic values that people feel the natural world embodies. The a priori rejection of non-monetary, socio-cultural (and spiritual) values, by some proponents of NCA, suppresses and de-legitimises other ways of valuing and relating to the natural world, and forces a questionable, transactional framing onto the environment. Underneath the economic reframing of the environment, an unwillingness to address the behavioural drivers of ecosystem degradation remains. It is my hope that developments in Natural Capital Accounting are applied with great caution, lest irreversible damage and perverse outcomes become its legacy.

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About

My name is James and I live in Sydney, Australia.
I'm keen to explore solutions and techniques for addressing environmental challenges that draw from and recognise the social, political, ethical, creative etc. dimensions of such challenges.